Local extremes on FOREX are also perceived as support and resistance zones. This creates price reaction at those price levels. Our hypothesis: It is slightly more likely that price will retrace.
Interesting feature of this strategy is that it utilizes Risk reward ratio of 1:1. Stop loss and take profit are therefore almost equal. At absolutely chaotic market, when things go wrong, chances are, that strategy signal will be almost random. Therefore, our loss will be only the commission and spread (about one pip per position) this will give us plenty of time to adjust to new market condition and stay composed.
In other words: When this forex strategy works, we make money.When it doesn't, we lose just peanuts.
This also allows us to increase lot size (relatively to our account size).
Fractals are simply a way to identify locals max/min in the wave structure of the price. As such, they have many uses for forex trader. In this strategy we will use them as tool to mark entry price for our order.
Fractals apply on chosen currency (spread below 0,5 pips).
Timeframe 1 H.
Buy:
We place pending order for buy at price level marked by last fractal down (arrow). We always place order at price marked by last fractal created. Once new fractal is drawn and closed, we simply change parameters of pending order and place it accordingly.
Stop loss : 11 pips (1 pip is to cover spread and commission costs).
Take profit : 10 pips.
Sell:
We place pending order for sell at highest price level marked by last fractal up (arrow). We always place order at price marked by last fractal created. Once the new fractal is drawn and closed, we simply change parameters of pending order and place it accordingly.
Stop loss : 11 pips (1 pip is to cover spread and commission costs).
Take profit : 10 pips.
This strategy is almost foolproof, and it still offers a lot of room to grow and improve (considering trend, improve entry signal, etc.).
We have tested this forex strategy many times.
Results since 2003.
Initial deposit: 300 USD
Profit: Profit 6761 USD
Profit factor: 1,46
Quality of test modelling is mediocre, however it shows amazing potential of this forex strategy good enough.
